Boost to US economy as Americans shore up spending
- Americans largely shrugged off higher prices last month
- They stepped up their spending at retail stores and online
- This provided a boost to the economy
Americans largely shrugged off higher prices last month and stepped up their spending at retail stores and online, providing a boost to the economy.
Retail sales rose a seasonally adjusted 1.7% in October from September, the U.S. Commerce Department said Tuesday. That's the biggest gain since March and up from 0.8% in the previous month. Much of the sales increase also reflected higher prices.
Solid hiring, strong pay raises, and healthy savings for many households are underpinning robust spending. Americans are also still buying more cars, furniture, and other goods than they did before the pandemic, which is overwhelming U.S. ports and shipping firms and pushing up prices. The solid spending last month suggests the holiday shopping season is off to a strong start.
Tuesday's retail sales figures aren't adjusted for inflation, which rose 0.9% in October, the government said last Wednesday. In some categories, such as gas station sales, which rose 3.9% in October, a jump in gas prices accounted for nearly all the gain. Gas prices rose 3.7% in October, according to the government's inflation report.
Still, many major retailers reported healthy sales increases, another sign that high prices aren't deterring consumers from spending. Walmart and Home Depot reported rising sales and solid profits, though both companies saw their costs climb because of supply chain disruptions. Walmart said its consolidated gross profit rate took a hit primarily due to increased supply chain costs, in addition to other issues.
Businesses and other employers are rapidly increasing pay to fill a near-record number of open jobs. Wages and salaries jumped in the July-September quarter, compared with a year earlier, by the most in 20 years. That's giving more Americans extra money to spend.
Yet inflation has eroded those gains for most Americans. Prices jumped 6.2% in October from a year earlier, the government said, Wednesday the most in 31 years.
Still, a wide range of stores reported healthy sales gains, including online retailers, which reported an increase of 4% last month. Sales at electronics and appliance stores rose 3.8%. Both figures suggest shoppers are already stepping up their holiday shopping. Auto sales rose 1.8% as auto manufacturing has perked up.
Sales at restaurants and bars, however, were flat last month, a sign that Americans are still spending more on goods than services, a key reason for all the supply chain snarls.